The logo for Coinbase Global Inc, the largest US cryptocurrency exchange, is displayed on the Nasdaq MarketSite jumbotron and others in Times Square in New York, US, April 14, 2021.
Shannon Stapleton | Reuters
Coinbase will buy $500 million worth of crypto on its balance sheet and allocate 10% of its quarterly profits to a crypto asset portfolio, company leaders announced late Thursday.
The company plans to invest in “Ethereum, Proof of Stake assets, DeFi tokens, and many other crypto assets supported for trading on our platform,” becoming the first public company to do so, chief financial officer Alesia said. Haas in a blog post Wednesday night. .
CEO Brian Armstrong first revealed the brokerage’s plans in an earlier tweet, saying he expects allocation to grow as the market matures, and indicates the company has ambitions to diversify its crypto services and business. mainly focused on trade.
“Hopefully over time we will be able to run more of our business in crypto,” Armstrong said on Twitter. “Today it’s still a mix.”
The price of bitcoin climbed higher on the news on Thursday, passing $47,000 Friday morning after being below $45,000 for the past two days. Coinbase stocks are up more than 1% in pre-market trading.
The few companies that have chosen to own bitcoin, such as Microstrategy and Tesla (with help from Coinbase), have done so as a hedge against inflation and possible devaluation of the US dollar. On Thursday, Citi placed Microstrategy’s rating under review, suspending its price target and estimates due to its investment in bitcoin and correlation with bitcoin price.
The news comes the week after Palantir reported quarterly results showing it had bought $50 million worth of physical gold to allegedly hedge against black swan events. Palantir also said it accepts customer payments in bitcoin, but no one has used the option.
That same week, Coinbase reported quarterly earnings and growth stats that stunned analysts, who are especially patient about the stock’s correlation to bitcoin’s price and volatility, and optimistic about its long-term plans to fuel innovation in the existing financial system. .
Haas said the investments will be driven by its custodial crypto balances and will be deployed “over several years using a dollar cost averaging strategy.” She added that Coinbase is investing for the long term and “will only divest under certain circumstances, such as removing assets from our platform.”
Oppenheimer’s Owen Lau said he doesn’t expect the new investment policy to diminish the correlation between Coinbase and bitcoin “materially in the foreseeable future.” However, he said he sees it as a signal that, over time, Coinbase can “further facilitate and influence both retail and institutional adoption” by integrating cryptocurrencies into its own operations, such as paying vendors and employees, for example.
The news follows a Wall Street Journal report this week that Coinbase has saved $4 billion in cash to weather regulatory headwinds. Lau notes that this means the company still has a lot of cash on hand after the bitcoin transaction.
“Share buybacks and dividends appear to be off the table at least in the near term, but we believe management will use excess capital to reinvest in the company and make acquisitions, especially in its international presence and subscription-based business,” he added. ready.